Category Archives: Blockchain

Post navigation

Bomb Threats

Ransomware that demands cryptocurrency payments in exchange for releasing infected computers is an old phenomenon.

Now that practice has a dark new twist. This week, scammers have started emailing bomb threats to hundreds of schools, hospitals, businesses and other public and private institutions in multiple countries, demanding bitcoin payments in exchange for not setting off seemingly made-up explosives. The threats caused mayhem. Entire blocks were shut down in several cities — a dark testament to the power of online anonymity.

No Terrorism Here

Emergency responders were dispatched in multiple cities across North America to investigate the threats — including a dozen threats in DC alone. Not a single bomb has been found at press time, leading authorities to believe the threats were an elaborate bluff.

The advice from the U.S. government: tell the FBI, and do not pay the ransom of $20,000 U.S. in Bitcoin.

The cryptic emails demanded that victims send the payment to a bitcoin address.

“If you are late with the transaction,” the email says, “the bomb will explode.”

The takeaway: advocates have long predicted that blockchain technology is about to go mainstream, but to date the technology hasn’t strayed far from its early roots in crime and drug sales. Only time will tell whether the tech will eventually shed that identity.

Trusted by 30 million wallet users and counting in over 140 countries to store digital currencies in a safe, non-custodial wallet. With Blockchain Wallet, only you have access to your private keys (we don’t store them).

You can instantly transact with anyone in the world and transform the financial system right from your pocket.

Create a new Blockchain Wallet or access your existing one on your mobile device. It’s free and takes just a few seconds.

Need help or have a question? Our best-in-class support team will always be there for you. Reach out at support.blockchain.com or via twitter – @AskBlockchain.

: a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network also : the technology used to create such a database The technology at the heart of bitcoin and other virtual currencies, blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Marco Iansiti and Karim R. Lakhani

Chances are that youve heard of bitcoin, the digital currency that many predict will revolutionize payments or prove to be a massive fraud depending on what you read. Bitcoin is an application that runs on the Blockchain, which is ultimately a more interesting and profound innovation.

The Blockchain is a secure transaction ledger database that is shared by all parties participating in an established, distributed network of computers. It records and stores every transaction that occurs in the network, essentially eliminating the need for trusted third parties such as payment processors. Blockchain proponents often describe the innovation as a transfer of trust in a trustless world, referring to the fact that the entities participating in a transaction are not necessarily known to each other yet they exchange value with surety and no third-party validation. For this reason, the Blockchain is a potential game changer.

In 2008, Satoshi Nakamoto, the pseudonymous person or group of people credited with developing bitcoin, released a whitepaper describing the software protocol. Since then, the network has grown and bitcoinhas become a recognized unit of value around the globe. Bitcoinis extremely important because it provides a mechanism for accessing the Blockchain but its not the only application that can leverage the platform.

Bitcoin has also been on the receiving end of some bad press, such as around the collapse of the Mt. Gox bitcoin exchange earlier last year. The Mt. Gox story is not necessarily an indictment of bitcoin. For the purposes of this post, simply remember this: bitcoin is just a mechanism for transacting on the Blockchain and the Blockchain is the key innovation.

The Blockchain enables the anonymous exchange of digital assets, such as bitcoin, but it is not technically dependent on bitcoin. The elegance of the Blockchain is that it obviates the need for a central authority to verify trust and the transfer of value. It transfers power and control from large entities to the many, enabling safe, fast, cheaper transactions despite the fact that we may not know the entities we are dealing with.

The mechanics of the Blockchain are novel and highly disruptive. As people transact in a Blockchain ecosystem, a public record of all transactions is automatically created. Computers verify each transaction with sophisticated algorithms to confirm the transfer of value and create a historical ledger of all activity. The computers that form the network that are processing the transactions are located throughout the world and importantly are not owned or controlled by any single entity. The process is real-time, and much more secure than relying on a central authority to verify a transaction.

There are many analogous concepts both ancient and modern. Technology has and will continue to transfer power and control from central authorities and distribute them to the masses. For example, time used to be determined and communicated by large clock towers that were expensive to build and maintain. Engineering innovations ultimately decentralized the quantification of time to the individual. Likewise, WhatsApp, a popular cross platform messaging app, cut the transaction cost of sending messages globally and cut profits for the carriers. The central authority (phone carriers) lost to the application (WhatsApp) built on a decentralized network (i.e. the Internet).

Similarly, third parties that currently verify transactions (the central authority) stand to lose against the Blockchain (the decentralized network). As such, the Blockchain essentially disintermediates these third-party transaction verifiers: auditors, legal services, payment processors, brokerages and other similar organizations.

While you may not be convinced that exchanging bitcoin is an invaluable service, there are many other examples of value transfer that are critical and currently very slow and expensive. Consider the exchange of property: numerous intermediaries are currently involved in this process, such as a third-party escrow service that works for both parties to ensure a smooth transfer. The escrow service, like other services built solely on trust and verification, collect fees that would be mitigated by performing the transaction on the Blockchain as would wire transfer fees, third party financial auditing, contract execution, etc.

The use case of the Blockchain enabling a decentralized currency exchange such as bitcoin is well defined and will likely be the dominant use case near term, however there are a multitude of innovative and disruptive use cases. Companies are already building their own Blockchains for various applications such as Gridcoin that leverages the Blockchain to crowdsource scientific computing projects. Gridcoin uses its own protocols that require much less computing power and electricity to manage than traditional bitcoin networks.

The Blockchain is a foundational technology, like TCP/IP, which enables the Internet. And much like the Internet in the late 1990s, we dont know exactly how the Blockchain will evolve, but evolve it will.

Similar to the Internet, the Blockchain must also be allowed to grow unencumbered. This will require careful handling that recognizes the difference between the platform and the applications that run on it. TCP/IP empowers numerous financial applications that are regulated, but TCP/IP is not regulated as a financial instrument. The Blockchain should receive similar consideration. While the predominant use case for the Blockchain today is bitcoin currency exchange that may require regulation, this will change over time.

Had we over-regulated the Internet early on, we would have missed out on many innovations that we cant imagine living without today. The same is true for the Blockchain. Disruptive technologies rarely fit neatly into existing regulatory considerations, but rigid regulatory frameworks have repeatedly stifled innovation. Its likely that innovations in the Blockchain will outpace policy, lets not slow it down.

A blockchain,[1][2][3] originally block chain,[4][5] is a growing list of records, called blocks, which are linked using cryptography.[1][6] Each block contains a cryptographic hash of the previous block,[6] a timestamp, and transaction data (generally represented as a merkle tree root hash).

By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.[7] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain.[8]

Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.[1] The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications,[1][3] and blockchains which are readable by the public are widely used by cryptocurrencies. Blockchain is considered a type of payment rail.[9] Private blockchains have been proposed for business use. Sources such as the Computerworld called the marketing of such blockchains without a proper security model “snake oil”.[10]

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta.[6][11] They wanted to implement a system where document timestamps could not be tampered with. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.[6][12]

The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a Hashcash-like method to add blocks to the chain without requiring them to be signed by a trusted party.[6] The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.[1]

In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20GB (gigabytes).[13] In January 2015, the size had grown to almost 30GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50GB to 100GB in size.

The words block and chain were used separately in Satoshi Nakamoto’s original paper, but were eventually popularized as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014.[14] The Economist described one implementation of this second-generation programmable blockchain as coming with “a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”[1]

As of 2016[update], blockchain 2.0 implementations continue to require an off-chain oracle to access any “external data or events based on time or market conditions [that need] to interact with the blockchain.”[15]

IBM opened a blockchain innovation research center in Singapore in July 2016.[16] A working group for the World Economic Forum met in November 2016 to discuss the development of governance models related to blockchain.

According to Accenture, an application of the diffusion of innovations theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the early adopters phase.[17] Industry trade groups joined to create the Global Blockchain Forum in 2016, an initiative of the Chamber of Digital Commerce.

In May 2018, Gartner found that only 1% of CIOs indicated any kind of blockchain adoption within their organisations, and only 8% of CIOs were in the short-term planning or [looking at] active experimentation with blockchain.[18]

In November 2018, Conservative MEP Emma McClarkins plan to utilise blockchain technology to boost trade was backed by the European Parliaments Trade Committee. [19]

A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.[1][20] This allows the participants to verify and audit transactions independently and relatively inexpensively.[21] A blockchain database is managed autonomously using a peer-to-peer network and a distributed timestamping server. They are authenticated by mass collaboration powered by collective self-interests.[22] Such a design facilitates robust workflow where participants’ uncertainty regarding data security is marginal. The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending. A blockchain has been described as a value-exchange protocol.[14] This blockchain-based exchange of value can be completed quicker, safer and cheaper than with traditional systems.[23] A blockchain can maintain title rights because, when properly set up to detail the exchange agreement, it provides a record that compels offer and acceptance.

Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree.[1] Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.[1] This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.[24]

Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher value can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[24] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Blockchains are typically built to add the score of new blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded decreases exponentially[25] as more blocks are built on top of it, eventually becoming very low.[1][26]:ch. 08[27] For example, in a blockchain using the proof-of-work system, the chain with the most cumulative proof-of-work is always considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.[28]

The block time is the average time it takes for the network to generate one extra block in the blockchain.[29] Some blockchains create a new block as frequently as every five seconds.[30] By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is 10 minutes.[31]

A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software.

If one group of nodes continues to use the old software while the other nodes use the new software, a split can occur. For example, Ethereum has hard-forked to “make whole” the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. In this case, the fork resulted in a split creating Ethereum and Ethereum Classic chains. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment.

Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013.[32]

By storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally.[1] The decentralized blockchain may use ad-hoc message passing and distributed networking.

Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography.[4]:5 A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.[1]

Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by massive database replication[8] and computational trust. No centralized “official” copy exists and no user is “trusted” more than any other.[4] Transactions are broadcast to the network using software. Messages are delivered on a best-effort basis. Mining nodes validate transactions,[24] add them to the block they are building, and then broadcast the completed block to other nodes.[26]:ch. 08 Blockchains use various time-stamping schemes, such as proof-of-work, to serialize changes.[33] Alternative consensus methods include proof-of-stake.[24] Growth of a decentralized blockchain is accompanied by the risk of centralization because the computer resources required to process larger amounts of data become more expensive.[34]

Open blockchains are more user-friendly than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain.[35][36][37][38][39] Proponents of permissioned or private chains argue that the term “blockchain” may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases.[40] Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.[41]:3031 Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision.[35][37] Nikolai Hampton of Computerworld said that “many in-house blockchain solutions will be nothing more than cumbersome databases,” and “without a clear security model, proprietary blockchains should be eyed with suspicion.”[10][42]

The great advantage to an open, permissionless, or public, blockchain network is that guarding against bad actors is not required and no access control is needed.[25] This means that applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer.[25]

Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include a proof of work. To prolong the blockchain, bitcoin uses Hashcash puzzles. While Hashcash was designed in 1997 by Adam Back, the original idea was first proposed by Cynthia Dwork and Moni Naor and Eli Ponyatovski in their 1992 paper “Pricing via Processing or Combatting Junk Mail”.

Financial companies have not prioritised decentralized blockchains.[43]In 2016, venture capital investment for blockchain-related projects was weakening in the USA but increasing in China.[44] Bitcoin and many other cryptocurrencies use open (public) blockchains. As of April2018[update], bitcoin has the highest market capitalization.

Permissioned blockchains use an access control layer to govern who has access to the network.[45] In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owner. They do not rely on anonymous nodes to validate transactions nor do they benefit from the network effect.[46][bettersourceneeded] Permissioned blockchains can also go by the name of ‘consortium’ or ‘hybrid’ blockchains.[47]

The New York Times noted in both 2016 and 2017 that many corporations are using blockchain networks “with private blockchains, independent of the public system.”[48][49][bettersourceneeded]

Nikolai Hampton pointed out in Computerworld that “There is also no need for a ’51 percent’ attack on a private blockchain, as the private blockchain (most likely) already controls 100 percent of all block creation resources. If you could attack or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their network and alter transactions however you wished.”[10] This has a set of particularly profound adverse implications during a financial crisis or debt crisis like the financial crisis of 200708, where politically powerful actors may make decisions that favor some groups at the expense of others,[50][51] and “the bitcoin blockchain is protected by the massive group mining effort. It’s unlikely that any private blockchain will try to protect records using gigawatts of computing powerit’s time consuming and expensive.”[10] He also said, “Within a private blockchain there is also no ‘race’; there’s no incentive to use more power or discover blocks faster than competitors. This means that many in-house blockchain solutions will be nothing more than cumbersome databases.”[10]

Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin. There are a few operational products maturing from proof of concept by late 2016.[44]

As of 2016[update], some observers remain skeptical. Steve Wilson, of Constellation Research, believes the technology has been hyped with unrealistic claims.[52] To mitigate risk, businesses are reluctant to place blockchain at the core of the business structure.[53]

Most cryptocurrencies use blockchain technology to record transactions. For example, the bitcoin network and Ethereum network are blockchain-based. On May 8, 2018 Facebook confirmed that it is opening a new blockchain group[54] which will be headed by David Marcus who previously was in charge of Messenger. According to The Verge Facebook is planning to launch its own cryptocurrency for facilitating payments on the platform.[55]

Blockchain-based smart contracts are proposed contracts that could be partially or fully executed or enforced without human interaction.[56] One of the main objectives of a smart contract is automated escrow. An IMF staff discussion reported that smart contracts based on blockchain technology might reduce moral hazards and optimize the use of contracts in general. But “no viable smart contract systems have yet emerged.” Due to the lack of widespread use their legal status is unclear.[57]

Major portions of the financial industry are implementing distributed ledgers for use in banking,[58][59][60] and according to a September 2016 IBM study, this is occurring faster than expected.[61]

Banks are interested in this technology because it has potential to speed up back office settlement systems.[62]

Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.[63][64]

Berenberg, a German bank, believes that blockchain is an “overhyped technology” that has had a large number of “proofs of concept”, but still has major challenges, and very few success stories.[65]

Some video games are based on blockchain technology. The first such game, Huntercoin, was released in February, 2014.[66][unreliable source] Another blockchain game is CryptoKitties, launched in November 2017.[67] The game made headlines in December 2017 when a cryptokitty character – an-in game virtual pet – was sold for US$100,000.[68][irrelevant citation] CryptoKitties illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network with about 30% of all Ethereum transactions being for the game.[69][irrelevant citation]

Cryptokitties also demonstrated how blockchains can be used to catalog game assets (digital assets).[70]

Within the video game industry, while blockchain use is seen as part of a marketplace mechanism, such as with Robot Cache, blockchain is also postulated as a way to share video game assets between various games. The Blockchain Game Alliance was formed in September 2018 to explore alternative uses of blockchains in video gaming with support of Ubisoft and Fig, among others.[71]

Blockchain technology can be used to create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, such as wireless users[72] or musicians.[73] In 2017, IBM partnered with ASCAP and PRS for Music to adopt blockchain technology in music distribution.[74] Imogen Heap’s Mycelia service has also been proposed as blockchain-based alternative “that gives artists more control over how their songs and associated data circulate among fans and other musicians.”[75][76] Everledger is one of the inaugural clients of IBM’s blockchain-based tracking service.[77]

Walmart and IBM are running a trial to use a blockchain-backed system for supply chain monitoringall nodes of the blockchain are administered by Walmart and are located on the IBM cloud.[78]

New distribution methods are available for the insurance industry such as peer-to-peer insurance, parametric insurance and microinsurance following the adoption of blockchain.[79][80] The sharing economy and IoT are also set to benefit from blockchains because they involve many collaborating peers.[81] Online voting is another application of the blockchain.[82][83]

Other designs include:

In September 2018, IBM and a start-up Hu-manity.co launched a blockchain-based app that let patients sell anonymized data to pharmaceutical companies.[87][88]

Currently, there are three types of blockchain networks – public blockchains, private blockchains and consortium blockchains.

A public blockchain has absolutely no access restrictions. Anyone with an internet connection can send transactions[disambiguation needed] to it as well as become a validator (i.e., participate in the execution of a consensus protocol).[89][self-published source?] Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm.

Some of the largest, most known public blockchains are Bitcoin and Ethereum.

A private blockchain is permissioned.[45] One cannot join it unless invited by the network administrators. Participant and validator access is restricted.

This type of blockchains can be considered a middle-ground for companies that are interested in the blockchain technology in general but are not comfortable with a level of control offered by public networks. Typically, they seek to incorporate blockchain into their accounting and record-keeping procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public internet.

A consortium blockchain is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network. The administrators of a consortium chain restrict users’ reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol.

In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker (2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology.[90]

The Bank for International Settlements has criticized the public proof-of-work blockchains for high energy consumption.[93][91][94]

Nicholas Weaver, of the International Computer Science Institute at the University of California, Berkeley examines blockchain’s online security, and the energy efficiency of proof-of-work public blockchains, and in both cases finds it grossly inadequate.[92][95]

In September 2015, the first peer-reviewed academic journal dedicated to cryptocurrency and blockchain technology research, Ledger, was announced. The inaugural issue was published in December 2016.[96] The journal covers aspects of mathematics, computer science, engineering, law, economics and philosophy that relate to cryptocurrencies such as bitcoin.[97][98]

The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[99]

A blockchain,[1][2][3] originally block chain,[4][5] is a growing list of records, called blocks, which are linked using cryptography.[1][6] Each block contains a cryptographic hash of the previous block,[6] a timestamp, and transaction data (generally represented as a merkle tree root hash).

By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.[7] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain.[8]

Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.[1] The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications,[1][3] and blockchains which are readable by the public are widely used by cryptocurrencies. Blockchain is considered a type of payment rail.[9] Private blockchains have been proposed for business use. Sources such as the Computerworld called the marketing of such blockchains without a proper security model “snake oil”.[10]

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta.[6][11] They wanted to implement a system where document timestamps could not be tampered with. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.[6][12]

The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a Hashcash-like method to add blocks to the chain without requiring them to be signed by a trusted party.[6] The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.[1]

In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20GB (gigabytes).[13] In January 2015, the size had grown to almost 30GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50GB to 100GB in size.

The words block and chain were used separately in Satoshi Nakamoto’s original paper, but were eventually popularized as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014.[14] The Economist described one implementation of this second-generation programmable blockchain as coming with “a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”[1]

As of 2016[update], blockchain 2.0 implementations continue to require an off-chain oracle to access any “external data or events based on time or market conditions [that need] to interact with the blockchain.”[15]

IBM opened a blockchain innovation research center in Singapore in July 2016.[16] A working group for the World Economic Forum met in November 2016 to discuss the development of governance models related to blockchain.

According to Accenture, an application of the diffusion of innovations theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the early adopters phase.[17] Industry trade groups joined to create the Global Blockchain Forum in 2016, an initiative of the Chamber of Digital Commerce.

In May 2018, Gartner found that only 1% of CIOs indicated any kind of blockchain adoption within their organisations, and only 8% of CIOs were in the short-term planning or [looking at] active experimentation with blockchain.[18]

In November 2018, Conservative MEP Emma McClarkins plan to utilise blockchain technology to boost trade was backed by the European Parliaments Trade Committee. [19]

A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.[1][20] This allows the participants to verify and audit transactions independently and relatively inexpensively.[21] A blockchain database is managed autonomously using a peer-to-peer network and a distributed timestamping server. They are authenticated by mass collaboration powered by collective self-interests.[22] Such a design facilitates robust workflow where participants’ uncertainty regarding data security is marginal. The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending. A blockchain has been described as a value-exchange protocol.[14] This blockchain-based exchange of value can be completed quicker, safer and cheaper than with traditional systems.[23] A blockchain can maintain title rights because, when properly set up to detail the exchange agreement, it provides a record that compels offer and acceptance.

Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree.[1] Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.[1] This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.[24]

Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher value can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[24] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Blockchains are typically built to add the score of new blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded decreases exponentially[25] as more blocks are built on top of it, eventually becoming very low.[1][26]:ch. 08[27] For example, in a blockchain using the proof-of-work system, the chain with the most cumulative proof-of-work is always considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.[28]

The block time is the average time it takes for the network to generate one extra block in the blockchain.[29] Some blockchains create a new block as frequently as every five seconds.[30] By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is 10 minutes.[31]

A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software.

If one group of nodes continues to use the old software while the other nodes use the new software, a split can occur. For example, Ethereum has hard-forked to “make whole” the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. In this case, the fork resulted in a split creating Ethereum and Ethereum Classic chains. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment.

Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013.[32]

By storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally.[1] The decentralized blockchain may use ad-hoc message passing and distributed networking.

Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography.[4]:5 A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.[1]

Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by massive database replication[8] and computational trust. No centralized “official” copy exists and no user is “trusted” more than any other.[4] Transactions are broadcast to the network using software. Messages are delivered on a best-effort basis. Mining nodes validate transactions,[24] add them to the block they are building, and then broadcast the completed block to other nodes.[26]:ch. 08 Blockchains use various time-stamping schemes, such as proof-of-work, to serialize changes.[33] Alternative consensus methods include proof-of-stake.[24] Growth of a decentralized blockchain is accompanied by the risk of centralization because the computer resources required to process larger amounts of data become more expensive.[34]

Open blockchains are more user-friendly than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain.[35][36][37][38][39] Proponents of permissioned or private chains argue that the term “blockchain” may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases.[40] Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.[41]:3031 Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision.[35][37] Nikolai Hampton of Computerworld said that “many in-house blockchain solutions will be nothing more than cumbersome databases,” and “without a clear security model, proprietary blockchains should be eyed with suspicion.”[10][42]

The great advantage to an open, permissionless, or public, blockchain network is that guarding against bad actors is not required and no access control is needed.[25] This means that applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer.[25]

Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include a proof of work. To prolong the blockchain, bitcoin uses Hashcash puzzles. While Hashcash was designed in 1997 by Adam Back, the original idea was first proposed by Cynthia Dwork and Moni Naor and Eli Ponyatovski in their 1992 paper “Pricing via Processing or Combatting Junk Mail”.

Financial companies have not prioritised decentralized blockchains.[43]In 2016, venture capital investment for blockchain-related projects was weakening in the USA but increasing in China.[44] Bitcoin and many other cryptocurrencies use open (public) blockchains. As of April2018[update], bitcoin has the highest market capitalization.

Permissioned blockchains use an access control layer to govern who has access to the network.[45] In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owner. They do not rely on anonymous nodes to validate transactions nor do they benefit from the network effect.[46][bettersourceneeded] Permissioned blockchains can also go by the name of ‘consortium’ or ‘hybrid’ blockchains.[47]

The New York Times noted in both 2016 and 2017 that many corporations are using blockchain networks “with private blockchains, independent of the public system.”[48][49][bettersourceneeded]

Nikolai Hampton pointed out in Computerworld that “There is also no need for a ’51 percent’ attack on a private blockchain, as the private blockchain (most likely) already controls 100 percent of all block creation resources. If you could attack or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their network and alter transactions however you wished.”[10] This has a set of particularly profound adverse implications during a financial crisis or debt crisis like the financial crisis of 200708, where politically powerful actors may make decisions that favor some groups at the expense of others,[50][51] and “the bitcoin blockchain is protected by the massive group mining effort. It’s unlikely that any private blockchain will try to protect records using gigawatts of computing powerit’s time consuming and expensive.”[10] He also said, “Within a private blockchain there is also no ‘race’; there’s no incentive to use more power or discover blocks faster than competitors. This means that many in-house blockchain solutions will be nothing more than cumbersome databases.”[10]

Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin. There are a few operational products maturing from proof of concept by late 2016.[44]

As of 2016[update], some observers remain skeptical. Steve Wilson, of Constellation Research, believes the technology has been hyped with unrealistic claims.[52] To mitigate risk, businesses are reluctant to place blockchain at the core of the business structure.[53]

Most cryptocurrencies use blockchain technology to record transactions. For example, the bitcoin network and Ethereum network are blockchain-based. On May 8, 2018 Facebook confirmed that it is opening a new blockchain group[54] which will be headed by David Marcus who previously was in charge of Messenger. According to The Verge Facebook is planning to launch its own cryptocurrency for facilitating payments on the platform.[55]

Blockchain-based smart contracts are proposed contracts that could be partially or fully executed or enforced without human interaction.[56] One of the main objectives of a smart contract is automated escrow. An IMF staff discussion reported that smart contracts based on blockchain technology might reduce moral hazards and optimize the use of contracts in general. But “no viable smart contract systems have yet emerged.” Due to the lack of widespread use their legal status is unclear.[57]

Major portions of the financial industry are implementing distributed ledgers for use in banking,[58][59][60] and according to a September 2016 IBM study, this is occurring faster than expected.[61]

Banks are interested in this technology because it has potential to speed up back office settlement systems.[62]

Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.[63][64]

Berenberg, a German bank, believes that blockchain is an “overhyped technology” that has had a large number of “proofs of concept”, but still has major challenges, and very few success stories.[65]

Some video games are based on blockchain technology. The first such game, Huntercoin, was released in February, 2014.[66][unreliable source] Another blockchain game is CryptoKitties, launched in November 2017.[67] The game made headlines in December 2017 when a cryptokitty character – an-in game virtual pet – was sold for US$100,000.[68][irrelevant citation] CryptoKitties illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network with about 30% of all Ethereum transactions being for the game.[69][irrelevant citation]

Cryptokitties also demonstrated how blockchains can be used to catalog game assets (digital assets).[70]

Within the video game industry, while blockchain use is seen as part of a marketplace mechanism, such as with Robot Cache, blockchain is also postulated as a way to share video game assets between various games. The Blockchain Game Alliance was formed in September 2018 to explore alternative uses of blockchains in video gaming with support of Ubisoft and Fig, among others.[71]

Blockchain technology can be used to create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, such as wireless users[72] or musicians.[73] In 2017, IBM partnered with ASCAP and PRS for Music to adopt blockchain technology in music distribution.[74] Imogen Heap’s Mycelia service has also been proposed as blockchain-based alternative “that gives artists more control over how their songs and associated data circulate among fans and other musicians.”[75][76] Everledger is one of the inaugural clients of IBM’s blockchain-based tracking service.[77]

Walmart and IBM are running a trial to use a blockchain-backed system for supply chain monitoringall nodes of the blockchain are administered by Walmart and are located on the IBM cloud.[78]

New distribution methods are available for the insurance industry such as peer-to-peer insurance, parametric insurance and microinsurance following the adoption of blockchain.[79][80] The sharing economy and IoT are also set to benefit from blockchains because they involve many collaborating peers.[81] Online voting is another application of the blockchain.[82][83]

Other designs include:

In September 2018, IBM and a start-up Hu-manity.co launched a blockchain-based app that let patients sell anonymized data to pharmaceutical companies.[87][88]

Currently, there are three types of blockchain networks – public blockchains, private blockchains and consortium blockchains.

A public blockchain has absolutely no access restrictions. Anyone with an internet connection can send transactions[disambiguation needed] to it as well as become a validator (i.e., participate in the execution of a consensus protocol).[89][self-published source?] Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm.

Some of the largest, most known public blockchains are Bitcoin and Ethereum.

A private blockchain is permissioned.[45] One cannot join it unless invited by the network administrators. Participant and validator access is restricted.

This type of blockchains can be considered a middle-ground for companies that are interested in the blockchain technology in general but are not comfortable with a level of control offered by public networks. Typically, they seek to incorporate blockchain into their accounting and record-keeping procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public internet.

A consortium blockchain is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network. The administrators of a consortium chain restrict users’ reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol.

In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker (2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology.[90]

The Bank for International Settlements has criticized the public proof-of-work blockchains for high energy consumption.[93][91][94]

Nicholas Weaver, of the International Computer Science Institute at the University of California, Berkeley examines blockchain’s online security, and the energy efficiency of proof-of-work public blockchains, and in both cases finds it grossly inadequate.[92][95]

In September 2015, the first peer-reviewed academic journal dedicated to cryptocurrency and blockchain technology research, Ledger, was announced. The inaugural issue was published in December 2016.[96] The journal covers aspects of mathematics, computer science, engineering, law, economics and philosophy that relate to cryptocurrencies such as bitcoin.[97][98]

The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[99]

Chances are that youve heard of bitcoin, the digital currency that many predict will revolutionize payments or prove to be a massive fraud depending on what you read. Bitcoin is an application that runs on the Blockchain, which is ultimately a more interesting and profound innovation.

The Blockchain is a secure transaction ledger database that is shared by all parties participating in an established, distributed network of computers. It records and stores every transaction that occurs in the network, essentially eliminating the need for trusted third parties such as payment processors. Blockchain proponents often describe the innovation as a transfer of trust in a trustless world, referring to the fact that the entities participating in a transaction are not necessarily known to each other yet they exchange value with surety and no third-party validation. For this reason, the Blockchain is a potential game changer.

In 2008, Satoshi Nakamoto, the pseudonymous person or group of people credited with developing bitcoin, released a whitepaper describing the software protocol. Since then, the network has grown and bitcoinhas become a recognized unit of value around the globe. Bitcoinis extremely important because it provides a mechanism for accessing the Blockchain but its not the only application that can leverage the platform.

Bitcoin has also been on the receiving end of some bad press, such as around the collapse of the Mt. Gox bitcoin exchange earlier last year. The Mt. Gox story is not necessarily an indictment of bitcoin. For the purposes of this post, simply remember this: bitcoin is just a mechanism for transacting on the Blockchain and the Blockchain is the key innovation.

The Blockchain enables the anonymous exchange of digital assets, such as bitcoin, but it is not technically dependent on bitcoin. The elegance of the Blockchain is that it obviates the need for a central authority to verify trust and the transfer of value. It transfers power and control from large entities to the many, enabling safe, fast, cheaper transactions despite the fact that we may not know the entities we are dealing with.

The mechanics of the Blockchain are novel and highly disruptive. As people transact in a Blockchain ecosystem, a public record of all transactions is automatically created. Computers verify each transaction with sophisticated algorithms to confirm the transfer of value and create a historical ledger of all activity. The computers that form the network that are processing the transactions are located throughout the world and importantly are not owned or controlled by any single entity. The process is real-time, and much more secure than relying on a central authority to verify a transaction.

There are many analogous concepts both ancient and modern. Technology has and will continue to transfer power and control from central authorities and distribute them to the masses. For example, time used to be determined and communicated by large clock towers that were expensive to build and maintain. Engineering innovations ultimately decentralized the quantification of time to the individual. Likewise, WhatsApp, a popular cross platform messaging app, cut the transaction cost of sending messages globally and cut profits for the carriers. The central authority (phone carriers) lost to the application (WhatsApp) built on a decentralized network (i.e. the Internet).

Similarly, third parties that currently verify transactions (the central authority) stand to lose against the Blockchain (the decentralized network). As such, the Blockchain essentially disintermediates these third-party transaction verifiers: auditors, legal services, payment processors, brokerages and other similar organizations.

While you may not be convinced that exchanging bitcoin is an invaluable service, there are many other examples of value transfer that are critical and currently very slow and expensive. Consider the exchange of property: numerous intermediaries are currently involved in this process, such as a third-party escrow service that works for both parties to ensure a smooth transfer. The escrow service, like other services built solely on trust and verification, collect fees that would be mitigated by performing the transaction on the Blockchain as would wire transfer fees, third party financial auditing, contract execution, etc.

The use case of the Blockchain enabling a decentralized currency exchange such as bitcoin is well defined and will likely be the dominant use case near term, however there are a multitude of innovative and disruptive use cases. Companies are already building their own Blockchains for various applications such as Gridcoin that leverages the Blockchain to crowdsource scientific computing projects. Gridcoin uses its own protocols that require much less computing power and electricity to manage than traditional bitcoin networks.

The Blockchain is a foundational technology, like TCP/IP, which enables the Internet. And much like the Internet in the late 1990s, we dont know exactly how the Blockchain will evolve, but evolve it will.

Similar to the Internet, the Blockchain must also be allowed to grow unencumbered. This will require careful handling that recognizes the difference between the platform and the applications that run on it. TCP/IP empowers numerous financial applications that are regulated, but TCP/IP is not regulated as a financial instrument. The Blockchain should receive similar consideration. While the predominant use case for the Blockchain today is bitcoin currency exchange that may require regulation, this will change over time.

Had we over-regulated the Internet early on, we would have missed out on many innovations that we cant imagine living without today. The same is true for the Blockchain. Disruptive technologies rarely fit neatly into existing regulatory considerations, but rigid regulatory frameworks have repeatedly stifled innovation. Its likely that innovations in the Blockchain will outpace policy, lets not slow it down.

: a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network also : the technology used to create such a database The technology at the heart of bitcoin and other virtual currencies, blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Marco Iansiti and Karim R. Lakhani

Trusted by 30 million wallet users and counting in over 140 countries to store digital currencies in a safe, non-custodial wallet. With Blockchain Wallet, only you have access to your private keys (we don’t store them).

You can instantly transact with anyone in the world and transform the financial system right from your pocket.

Create a new Blockchain Wallet or access your existing one on your mobile device. It’s free and takes just a few seconds.

Need help or have a question? Our best-in-class support team will always be there for you. Reach out at support.blockchain.com or via twitter – @AskBlockchain.

Blockchair is a blockchain search and analytics engine. Over the last 30 days Blocks with the biggest size in bytes Blocks with the most transaction count Transactions with the highest fees in USD The largest tx internal amounts in ETH Calls with the most child calls Calls with the largest amounts in USD

MLG Blockchain is a global venture creation and advisory firm with blockchain technology development and broker dealer capabilities. Headquartered in Toronto and New York City with a distributed team across 20+ countries, MLG Blockchain offers premium blockchain consulting services, with both regional and global representation for clients around the world.

MLG Blockchain consultants have experience that spans across a wide range in the blockchain industry. We have played an important role in taking over 20 tokensales to market, which solve problems in industries as diverse as media to the refugees crisis, and has resulted in over 200M raised. Our government and enterprise teams have worked alongside Fortune 100 enterprises and global governments to accelerate blockchain adoption and transformations within the enterprise or country and we have built blockchain products with various architectures including POCs to production applications.

We are Blockchain and DLT agnostic and haveexperiencewith many blockchain fabricsincluding the Bitcoin Blockchain, Ethereum, Hyperledger, EOS, Ripple, Factom, Tron, Neo, Icon & Aion, among other protocols. We are also experienced working with many types of blockchain development and distributed ledger technology APIs, software frameworks, databases, and devOps tools for testing and agile development.

We have the experience to speed up your teams understanding of the blockchain and its potential opportunities to help you to create a blockchain strategy you can use today.

After three days of networking, exhibiting and deep learning, the Malta Blockchain Summit has come to a successful and somewhat enchanting close. Over 8,500 attendees graced us with their presence, be it the father of blockchain technology – Scott Stornetta, or the legendary John McAfee.

We’re truly glad to have hosted such a ground-breaking event. The interest and excitement generated by all parties emanated a sense that this is just the tip of the iceberg. All in all, we’re confident that this is but a taste of what is to come. That said, the MBS team is more than happy to take things to the next level.

We thank you for participating and can’t wait to see you for the next Malta Blockchain Summit!

A blockchain,[1][2][3] originally block chain,[4][5] is a growing list of records, called blocks, which are linked using cryptography.[1][6] Each block contains a cryptographic hash of the previous block,[6] a timestamp, and transaction data (generally represented as a merkle tree root hash).

By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.[7] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain.[8]

Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.[1] The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications,[1][3] and blockchains which are readable by the public are widely used by cryptocurrencies. Blockchain is considered a type of payment rail.[9] Private blockchains have been proposed for business use. Sources such as the Computerworld called the marketing of such blockchains without a proper security model “snake oil”.[10]

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta.[6][11] They wanted to implement a system where document timestamps could not be tampered with. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.[6][12]

The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a Hashcash-like method to add blocks to the chain without requiring them to be signed by a trusted party.[6] The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.[1]

In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20GB (gigabytes).[13] In January 2015, the size had grown to almost 30GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50GB to 100GB in size.

The words block and chain were used separately in Satoshi Nakamoto’s original paper, but were eventually popularized as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014.[14] The Economist described one implementation of this second-generation programmable blockchain as coming with “a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”[1]

As of 2016[update], blockchain 2.0 implementations continue to require an off-chain oracle to access any “external data or events based on time or market conditions [that need] to interact with the blockchain.”[15]

IBM opened a blockchain innovation research center in Singapore in July 2016.[16] A working group for the World Economic Forum met in November 2016 to discuss the development of governance models related to blockchain.

According to Accenture, an application of the diffusion of innovations theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the early adopters phase.[17] Industry trade groups joined to create the Global Blockchain Forum in 2016, an initiative of the Chamber of Digital Commerce.

In May 2018, Gartner found that only 1% of CIOs indicated any kind of blockchain adoption within their organisations, and only 8% of CIOs were in the short-term planning or [looking at] active experimentation with blockchain.[18]

In November 2018, Conservative MEP Emma McClarkins plan to utilise blockchain technology to boost trade was backed by the European Parliaments Trade Committee. [19]

A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.[1][20] This allows the participants to verify and audit transactions independently and relatively inexpensively.[21] A blockchain database is managed autonomously using a peer-to-peer network and a distributed timestamping server. They are authenticated by mass collaboration powered by collective self-interests.[22] Such a design facilitates robust workflow where participants’ uncertainty regarding data security is marginal. The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending. A blockchain has been described as a value-exchange protocol.[14] This blockchain-based exchange of value can be completed quicker, safer and cheaper than with traditional systems.[23] A blockchain can maintain title rights because, when properly set up to detail the exchange agreement, it provides a record that compels offer and acceptance.

Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree.[1] Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.[1] This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.[24]

Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher value can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[24] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Blockchains are typically built to add the score of new blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded decreases exponentially[25] as more blocks are built on top of it, eventually becoming very low.[1][26]:ch. 08[27] For example, in a blockchain using the proof-of-work system, the chain with the most cumulative proof-of-work is always considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.[28]

The block time is the average time it takes for the network to generate one extra block in the blockchain.[29] Some blockchains create a new block as frequently as every five seconds.[30] By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is 10 minutes.[31]

A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software.

If one group of nodes continues to use the old software while the other nodes use the new software, a split can occur. For example, Ethereum has hard-forked to “make whole” the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. In this case, the fork resulted in a split creating Ethereum and Ethereum Classic chains. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment.

Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013.[32]

By storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally.[1] The decentralized blockchain may use ad-hoc message passing and distributed networking.

Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography.[4]:5 A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.[1]

Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by massive database replication[8] and computational trust. No centralized “official” copy exists and no user is “trusted” more than any other.[4] Transactions are broadcast to the network using software. Messages are delivered on a best-effort basis. Mining nodes validate transactions,[24] add them to the block they are building, and then broadcast the completed block to other nodes.[26]:ch. 08 Blockchains use various time-stamping schemes, such as proof-of-work, to serialize changes.[33] Alternative consensus methods include proof-of-stake.[24] Growth of a decentralized blockchain is accompanied by the risk of centralization because the computer resources required to process larger amounts of data become more expensive.[34]

Open blockchains are more user-friendly than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain.[35][36][37][38][39] Proponents of permissioned or private chains argue that the term “blockchain” may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases.[40] Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.[41]:3031 Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision.[35][37] Nikolai Hampton of Computerworld said that “many in-house blockchain solutions will be nothing more than cumbersome databases,” and “without a clear security model, proprietary blockchains should be eyed with suspicion.”[10][42]

The great advantage to an open, permissionless, or public, blockchain network is that guarding against bad actors is not required and no access control is needed.[25] This means that applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer.[25]

Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include a proof of work. To prolong the blockchain, bitcoin uses Hashcash puzzles. While Hashcash was designed in 1997 by Adam Back, the original idea was first proposed by Cynthia Dwork and Moni Naor and Eli Ponyatovski in their 1992 paper “Pricing via Processing or Combatting Junk Mail”.

Financial companies have not prioritised decentralized blockchains.[43]In 2016, venture capital investment for blockchain-related projects was weakening in the USA but increasing in China.[44] Bitcoin and many other cryptocurrencies use open (public) blockchains. As of April2018[update], bitcoin has the highest market capitalization.

Permissioned blockchains use an access control layer to govern who has access to the network.[45] In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owner. They do not rely on anonymous nodes to validate transactions nor do they benefit from the network effect.[46][bettersourceneeded] Permissioned blockchains can also go by the name of ‘consortium’ or ‘hybrid’ blockchains.[47]

The New York Times noted in both 2016 and 2017 that many corporations are using blockchain networks “with private blockchains, independent of the public system.”[48][49][bettersourceneeded]

Nikolai Hampton pointed out in Computerworld that “There is also no need for a ’51 percent’ attack on a private blockchain, as the private blockchain (most likely) already controls 100 percent of all block creation resources. If you could attack or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their network and alter transactions however you wished.”[10] This has a set of particularly profound adverse implications during a financial crisis or debt crisis like the financial crisis of 200708, where politically powerful actors may make decisions that favor some groups at the expense of others,[50][51] and “the bitcoin blockchain is protected by the massive group mining effort. It’s unlikely that any private blockchain will try to protect records using gigawatts of computing powerit’s time consuming and expensive.”[10] He also said, “Within a private blockchain there is also no ‘race’; there’s no incentive to use more power or discover blocks faster than competitors. This means that many in-house blockchain solutions will be nothing more than cumbersome databases.”[10]

Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin. There are a few operational products maturing from proof of concept by late 2016.[44]

As of 2016[update], some observers remain skeptical. Steve Wilson, of Constellation Research, believes the technology has been hyped with unrealistic claims.[52] To mitigate risk, businesses are reluctant to place blockchain at the core of the business structure.[53]

Most cryptocurrencies use blockchain technology to record transactions. For example, the bitcoin network and Ethereum network are blockchain-based. On May 8, 2018 Facebook confirmed that it is opening a new blockchain group[54] which will be headed by David Marcus who previously was in charge of Messenger. According to The Verge Facebook is planning to launch its own cryptocurrency for facilitating payments on the platform.[55]

Blockchain-based smart contracts are proposed contracts that could be partially or fully executed or enforced without human interaction.[56] One of the main objectives of a smart contract is automated escrow. An IMF staff discussion reported that smart contracts based on blockchain technology might reduce moral hazards and optimize the use of contracts in general. But “no viable smart contract systems have yet emerged.” Due to the lack of widespread use their legal status is unclear.[57]

Major portions of the financial industry are implementing distributed ledgers for use in banking,[58][59][60] and according to a September 2016 IBM study, this is occurring faster than expected.[61]

Banks are interested in this technology because it has potential to speed up back office settlement systems.[62]

Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.[63][64]

Berenberg, a German bank, believes that blockchain is an “overhyped technology” that has had a large number of “proofs of concept”, but still has major challenges, and very few success stories.[65]

Some video games are based on blockchain technology. The first such game, Huntercoin, was released in February, 2014.[66][unreliable source] Another blockchain game is CryptoKitties, launched in November 2017.[67] The game made headlines in December 2017 when a cryptokitty character – an-in game virtual pet – was sold for US$100,000.[68][irrelevant citation] CryptoKitties illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network with about 30% of all Ethereum transactions being for the game.[69][irrelevant citation]

Cryptokitties also demonstrated how blockchains can be used to catalog game assets (digital assets).[70]

Within the video game industry, while blockchain use is seen as part of a marketplace mechanism, such as with Robot Cache, blockchain is also postulated as a way to share video game assets between various games. The Blockchain Game Alliance was formed in September 2018 to explore alternative uses of blockchains in video gaming with support of Ubisoft and Fig, among others.[71]

Blockchain technology can be used to create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, such as wireless users[72] or musicians.[73] In 2017, IBM partnered with ASCAP and PRS for Music to adopt blockchain technology in music distribution.[74] Imogen Heap’s Mycelia service has also been proposed as blockchain-based alternative “that gives artists more control over how their songs and associated data circulate among fans and other musicians.”[75][76] Everledger is one of the inaugural clients of IBM’s blockchain-based tracking service.[77]

Walmart and IBM are running a trial to use a blockchain-backed system for supply chain monitoringall nodes of the blockchain are administered by Walmart and are located on the IBM cloud.[78]

New distribution methods are available for the insurance industry such as peer-to-peer insurance, parametric insurance and microinsurance following the adoption of blockchain.[79][80] The sharing economy and IoT are also set to benefit from blockchains because they involve many collaborating peers.[81] Online voting is another application of the blockchain.[82][83]

Other designs include:

In September 2018, IBM and a start-up Hu-manity.co launched a blockchain-based app that let patients sell anonymized data to pharmaceutical companies.[87][88]

Currently, there are three types of blockchain networks – public blockchains, private blockchains and consortium blockchains.

A public blockchain has absolutely no access restrictions. Anyone with an internet connection can send transactions[disambiguation needed] to it as well as become a validator (i.e., participate in the execution of a consensus protocol).[89][self-published source?] Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm.

Some of the largest, most known public blockchains are Bitcoin and Ethereum.

A private blockchain is permissioned.[45] One cannot join it unless invited by the network administrators. Participant and validator access is restricted.

This type of blockchains can be considered a middle-ground for companies that are interested in the blockchain technology in general but are not comfortable with a level of control offered by public networks. Typically, they seek to incorporate blockchain into their accounting and record-keeping procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public internet.

A consortium blockchain is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network. The administrators of a consortium chain restrict users’ reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol.

In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker (2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology.[90]

The Bank for International Settlements has criticized the public proof-of-work blockchains for high energy consumption.[93][91][94]

Nicholas Weaver, of the International Computer Science Institute at the University of California, Berkeley examines blockchain’s online security, and the energy efficiency of proof-of-work public blockchains, and in both cases finds it grossly inadequate.[92][95]

In September 2015, the first peer-reviewed academic journal dedicated to cryptocurrency and blockchain technology research, Ledger, was announced. The inaugural issue was published in December 2016.[96] The journal covers aspects of mathematics, computer science, engineering, law, economics and philosophy that relate to cryptocurrencies such as bitcoin.[97][98]

The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[99]

Trusted by 30 million wallet users and counting in over 140 countries to store digital currencies in a safe, non-custodial wallet. With Blockchain Wallet, only you have access to your private keys (we don’t store them).

You can instantly transact with anyone in the world and transform the financial system right from your pocket.

Create a new Blockchain Wallet or access your existing one on your mobile device. It’s free and takes just a few seconds.

Need help or have a question? Our best-in-class support team will always be there for you. Reach out at support.blockchain.com or via twitter – @AskBlockchain.

Chances are that youve heard of bitcoin, the digital currency that many predict will revolutionize payments or prove to be a massive fraud depending on what you read. Bitcoin is an application that runs on the Blockchain, which is ultimately a more interesting and profound innovation.

The Blockchain is a secure transaction ledger database that is shared by all parties participating in an established, distributed network of computers. It records and stores every transaction that occurs in the network, essentially eliminating the need for trusted third parties such as payment processors. Blockchain proponents often describe the innovation as a transfer of trust in a trustless world, referring to the fact that the entities participating in a transaction are not necessarily known to each other yet they exchange value with surety and no third-party validation. For this reason, the Blockchain is a potential game changer.

In 2008, Satoshi Nakamoto, the pseudonymous person or group of people credited with developing bitcoin, released a whitepaper describing the software protocol. Since then, the network has grown and bitcoinhas become a recognized unit of value around the globe. Bitcoinis extremely important because it provides a mechanism for accessing the Blockchain but its not the only application that can leverage the platform.

Bitcoin has also been on the receiving end of some bad press, such as around the collapse of the Mt. Gox bitcoin exchange earlier last year. The Mt. Gox story is not necessarily an indictment of bitcoin. For the purposes of this post, simply remember this: bitcoin is just a mechanism for transacting on the Blockchain and the Blockchain is the key innovation.

The Blockchain enables the anonymous exchange of digital assets, such as bitcoin, but it is not technically dependent on bitcoin. The elegance of the Blockchain is that it obviates the need for a central authority to verify trust and the transfer of value. It transfers power and control from large entities to the many, enabling safe, fast, cheaper transactions despite the fact that we may not know the entities we are dealing with.

The mechanics of the Blockchain are novel and highly disruptive. As people transact in a Blockchain ecosystem, a public record of all transactions is automatically created. Computers verify each transaction with sophisticated algorithms to confirm the transfer of value and create a historical ledger of all activity. The computers that form the network that are processing the transactions are located throughout the world and importantly are not owned or controlled by any single entity. The process is real-time, and much more secure than relying on a central authority to verify a transaction.

There are many analogous concepts both ancient and modern. Technology has and will continue to transfer power and control from central authorities and distribute them to the masses. For example, time used to be determined and communicated by large clock towers that were expensive to build and maintain. Engineering innovations ultimately decentralized the quantification of time to the individual. Likewise, WhatsApp, a popular cross platform messaging app, cut the transaction cost of sending messages globally and cut profits for the carriers. The central authority (phone carriers) lost to the application (WhatsApp) built on a decentralized network (i.e. the Internet).

Similarly, third parties that currently verify transactions (the central authority) stand to lose against the Blockchain (the decentralized network). As such, the Blockchain essentially disintermediates these third-party transaction verifiers: auditors, legal services, payment processors, brokerages and other similar organizations.

While you may not be convinced that exchanging bitcoin is an invaluable service, there are many other examples of value transfer that are critical and currently very slow and expensive. Consider the exchange of property: numerous intermediaries are currently involved in this process, such as a third-party escrow service that works for both parties to ensure a smooth transfer. The escrow service, like other services built solely on trust and verification, collect fees that would be mitigated by performing the transaction on the Blockchain as would wire transfer fees, third party financial auditing, contract execution, etc.

The use case of the Blockchain enabling a decentralized currency exchange such as bitcoin is well defined and will likely be the dominant use case near term, however there are a multitude of innovative and disruptive use cases. Companies are already building their own Blockchains for various applications such as Gridcoin that leverages the Blockchain to crowdsource scientific computing projects. Gridcoin uses its own protocols that require much less computing power and electricity to manage than traditional bitcoin networks.

The Blockchain is a foundational technology, like TCP/IP, which enables the Internet. And much like the Internet in the late 1990s, we dont know exactly how the Blockchain will evolve, but evolve it will.

Similar to the Internet, the Blockchain must also be allowed to grow unencumbered. This will require careful handling that recognizes the difference between the platform and the applications that run on it. TCP/IP empowers numerous financial applications that are regulated, but TCP/IP is not regulated as a financial instrument. The Blockchain should receive similar consideration. While the predominant use case for the Blockchain today is bitcoin currency exchange that may require regulation, this will change over time.

Had we over-regulated the Internet early on, we would have missed out on many innovations that we cant imagine living without today. The same is true for the Blockchain. Disruptive technologies rarely fit neatly into existing regulatory considerations, but rigid regulatory frameworks have repeatedly stifled innovation. Its likely that innovations in the Blockchain will outpace policy, lets not slow it down.

: a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network also : the technology used to create such a database The technology at the heart of bitcoin and other virtual currencies, blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Marco Iansiti and Karim R. Lakhani